The Complete Guide to

FOREX TRADING
The Complete Guide to Forex Trading
Copyright © 2021

by Ibozi Trading

No part of this publication may be reproduced, distributed, or transmitted without

the prior written permission of the publisher, except in the case of brief quotations
embodied in critical reviews and certain other non-commercial uses permitted by
copyright law. For permission requests, write to the publisher at the e-mail address
below.

First Edition 2021

Ak Street
99010
Nicosia, Cyprus
www.ibozitrading.com
support@ibozitrading.com
 Disclaimer Notice:

Please note the information and trading strategies contained within this eBook is for
educational purposes. Under no circumstances is Ibozi Trading responsible for any
losses, direct or indirect, which are incurred because of the use of information
contained within this eBook, including, but not limited to, errors, omissions, or
inaccuracies.

Readers acknowledge that Ibozi Trading is not engaging in the rendering of legal,
financial, or professional advice. Any information and trading strategies provided
within this eBook is not intended as and does not constitute investment advice,
investment recommendation, an offer or solicitation to invest or trade. The content
within this eBook has been derived for educational purposes only.
Contents
Introduction 5
Chapter 1: Investment and Trading 6
Investment Mentality
Trading Mentality

Chapter 2: Concepts to Know 9

Long and Short Positions
P&L Illustrations
Understanding Lot Sizes
P&L Calculation
Leverage
Stop Loss & Take Profit
Market Execution and the Types of Orders
Spreads

Chapter 3: Technical Analysis Strategies 21

Support and Resistance Lines
Moving Averages
Indicators
Price Action Strategy

Chapter 4: Trading Psychology 27

Final Remark
Introduction
Welcome to this eBook, brought to you by Ibozi Trading.
The purpose of this eBook is about adopting the correct approach to financial trading.
Before all else, it is worth making clear that we are focusing on trading, rather than
investing. Whilst trading, we don’t actually own stocks, currencies or other assets,
instead, we speculate on the price movements of the assets in the short-term. We
don’t buy and sell assets, instead, we open long (buy) and short (sell) positions
relating to those assets. This kind of trading is known as “CFD Trading” in the market.
A contract for difference (CFD) is a contract that allows traders to speculate on the
future market movements of the assets such as foreign exchange, shares and
commodities. These concepts might be new to you but you will find all the answers
to your questions as you go along.
This eBook is intended for those who are experienced in this field as well as for those
who do not have any experience but would like to learn more and enter the world of
trading. For those who already have knowledge of trading, the contents of this eBook
will refresh their memories and enable them to gain a different perspective to
trading. On the other hand, the beginners will learn about the fundamentals of
trading which will provide a solid foundation for them to start trading. However,
please keep in mind that the expected results will come with time and experience.
Unlike other sources, you will not only find theoretical information contained here
but you will also feel our experience with trading in our own tone of voice. Even the
most complicated topics are explained in plain English. In this challenging but
entertaining journey, please feel free to use and benefit from our services to climb
the ladders of trading faster. Having said all of that, let’s take our first step to the
market.

The Complete Guide to Forex Trading www.ibozitrading.com 5

 Chapter 1: Investment and Trading

Introduction
We have described investment and trading as two different concepts. Obviously, our
main focus here is trading but no doubt a trader must know the differences between
trading and investment. Therefore, we will start with investment and later on we will
make a smooth transition to trading.

Investment Mentality
Investors try to detect financial instruments that may gain value in the future by using
“Fundamental Analysis” and they are mostly long-term “value” investors.

Fundamental analysis examines the macros of the relevant investment instrument.

For instance;
A stock investor analyses the company’s financial statements to see whether
the company is strong and promising or not.
A currency investor examines the economy of a country and factors including
interest rates, unemployment, or GDP to measure the value of that country’s
currency.
A crypto investor examines the “whitepaper” of the cryptocurrencies.
Whitepaper is an informative document issued by the company to highlight the
project or service.

The Complete Guide to Forex Trading www.ibozitrading.com 6

 Chapter 1: Investment and Trading

Trading Mentality
Traders are people who frequently open positions in financial instruments such as
forex, stocks, or cryptocurrencies. Unlike investors, their outlooks are usually short or
mid-term.
Traders focus on “Technical Analysis” rather than examining fundamentals like long-
term investors.
Technical Analysis is an analysis methodology for forecasting the direction of prices
through the study of past market data. In other words, technical analysts examine the
graphs of any financial instrument and make predictions about the future.
The advantage of technical analysis is that any financial instrument which has a
technical graph is tradable. In doing so, you will not need any macro information such
as an analysis of a country’s economic profile or a company’s financial statements.
You will find detailed information about technical analysis later on in this eBook. Now,
without further delay, let’s move on to the concepts that we must familiarize
ourselves with in trading.

The Complete Guide to Forex Trading www.ibozitrading.com 7

 Chapter 2: Concepts to Know

Long and Short Positions

Long position refers to a conventional buy position. Traders who open a long position
have an expectation that the price of an asset will go up and they will start making a
profit if the price rises above the price at which they opened their long position.
Short position is the opposite of a conventional long position and is equivalent to a
sell position. Traders who open a short position are actually predicting that the price
of an asset will fall and they will start making a profit if the price of the asset falls
below the price at which they opened their short position.

Instrument Expectation Position Entry Profit Scenario Loss Scenario

Price Closed Price Closed Price
EURUSD Rise Long 1.1740 >1.1740 <1.1740
EURUSD Fall Short 1.1740 <1.1740 >1.1740
XAUUSD Rise Long 1750 >1750 <1750
XAUUSD Fall Short 1750 <1750 >1750

As per the EURUSD and XAUUSD examples above, a trader can open any long or short
positions by forecasting the direction of the instruments.

*The exact profit & loss amounts will be explained later under the “Lot Sizes” title.
*The forecasting styles will be explained under “Technical Analysis Strategies” title

The Complete Guide to Forex Trading www.ibozitrading.com 8

 Chapter 2: Concepts to Know

ILLUSTRATION: P&L Scenarios for Long and Short Positions

The Complete Guide to Forex Trading www.ibozitrading.com 9

 Chapter 2: Concepts to Know

Understanding Lot Sizes

A lot in trading is a unit measuring a transaction amount. When traders place orders
on trading platforms, orders are placed in sizes quoted in lots. While bigger lot means
a bigger position and equivalently a higher risk, small lot means a small position and
equivalently a lower risk.
Brokers provide traders with the contract sizes and the lot size should be determined
by the contract size. The contract sizes may vary from broker to broker and you can
easily view them under the “details” of instrument that you are going to trade.
The contract size shows how many units of the selected currency you buy/sell for 1
lot. Please check the table below to understand the concept.

Instrument Contract Size Meaning Example

EURUSD 100.000 1 Lot = 100.000 Units of Long with 1 lot means
EURUSD buying 100.000 EUR against USD
GBPUSD 100.000 1 Lot = 100.000 Units of Short with 1 lot means
GBPUSD selling 100.000 GBP against USD
XAUUSD 100 1 Lot = 100 units of XAUUSD Long with 1 lot means
buying 100 unit of gold against
USD
XAGUSD 5.000 1 Lot = 5.000 units of XAGUSD Long with 1 lot means
buying 5.000 units SILVER per
ounce against USD
BRENT 1.000 1 Lot = 1.000 units of Brent Short with 1 lot means
selling 1.000 units BRENT
SP500 1 1 Lot = 1 units of SP500 Short with 1 lot means
selling 1 contract SP500
NASDAQ 1 1 Lot = 1 units of NASDAQ Long with 1 lot means
buying 1 contract NASDAQ

The Complete Guide to Forex Trading www.ibozitrading.com 10

 Chapter 2: Concepts to Know

Mini, Micro and Nano Lot Sizes

As it can be seen from the table, with 1 lot, a trader can buy the following:
100.000 EUR against USD. (Trader needs 100.000 EUR to open this position)

100 gold against USD. (Trader needs 175.000 USD to open this position, 1 gold=
1750$, trader will buy 100 Gold)
In this case, a trader must have a substantial amount of funds to be able to open such
positions.
Here is the question: How can a trader with limited funds open smaller positions?

With 0.1 lot size of EURUSD, trader buys 10.000 EUR against USD
With 0.01 lot size of EURUSD trader buys 1.000 EUR against USD
With 0.001 lot size of EURUSD trader buys 100 EUR against USD

As it can be seen from the example above, one of the advantages of trading is the
ability to open positions of any size depending on your funds. For instance, a trader
only needs 100 EUR to open a 0.001 Lot EURUSD position.
Note that some brokers don’t let traders to use nano lots.

The Complete Guide to Forex Trading www.ibozitrading.com 11

 Chapter 2: Concepts to Know

Profit & Loss Calculation

Let’s Calculate the Profit & Loss arising on the example below
QUESTION
Trader A opened a short position with 0.08 Lot for gold (XAUUSD) when the price was
1800$ and closed the position at 1630$
(Gold contract size=100)
What is the P&L?

ANSWER
STEP 1: The contract size of gold is 100 1 lot = 100 units.
STEP 2: Trader A opens a short position with 0.08 lots Trader sells (short) 8 units
of gold when the price is 1800$.
(If 1 lot is 100 units, 0.08 lots is 8 units)
STEP 3: 8 units of gold is 14400$ (1800x8) so Trader A needs to have 14400$ in his
account to be able to open this position in the first instance. (On the assumption that
there is no leverage)
STEP 3: The trader opened the short position when the price is 1800$ and closed it
when the price is 1630$. For 1 lot (100 units), the expected profit would be
17000$
(For 1 unit: 1800-1630=170$, for 100 units: 170x100=17000$)
STEP 4: For 0.08 lots (8 units), the profit of Trader A is 1360$
(Profit for 1 lot=17000$, then, profit for 0.08 lot=1700x0.08=1360$)

The Complete Guide to Forex Trading www.ibozitrading.com 12

 Chapter 2: Concepts to Know

Leverage
Leverage is the mechanism which allows traders to pay less than the full amount of
the investment. Some forex traders use leverage to profit from relatively small price
changes in currency pairs. However, leverage can enhance both profits as well as
losses. That is why, it should be arranged very carefully. Let’s see how does it work.

Example:
GBPUSD
CONTRACT SIZE: 100.000
Meaning, 1 lot of GBPUSD = 100.000 GBP worth position
With 1:10 Leverage = Trader needs(margin) 10.000 GBP to open 100.000 GBP worth
position
With 1:100 Leverage = Trader needs(margin) 1.000 GBP to open 100.000 GBP worth
position

The Complete Guide to Forex Trading www.ibozitrading.com 13

 Chapter 2: Concepts to Know

Advantages and Disadvantages of Leverage

Let’s create a scenario:
GBPUSD = 1.3900
Contract Size for GBPUSD is 100.000, that means 1 lot = 100.000 GBP worth position
Trader opened 0.1 Lot Size Position = 10.000 GBP worth position
Trader used 1:10 leverage = Trader used 1.000 GBP to open 10.000 GBP worth
position

ADVANTAGE OF LEVERAGE DISADVANTAGE OF LEVERAGE

5% INCREASE IN PRICE 5% DECREASE IN PRICE
New Price: 1.4595 New Price: 1.3205
His position was worth 10.000GBP His position was worth 10.000GBP
10.000 x 5% = 500 GBP Profit 10.000 x 5% = 500 GBP Loss
His Capital was: 1.000GBP His Capital was: 1.000GBP
His Capital now: 1.000+500 = 1.500GBP His Capital now: 1.000-500 = 500GBP
With 5% move, he earned 50% With 5% move, he lost 50%
10% INCREASE IN PRICE 10% DECREASE IN PRICE
New Price: 1.5290 New Price: 1.2510
His position was worth 10.000GBP His position was worth 10.000GBP
10.000 x 10% = 1.000 GBP Profit 10.000 x 10% = 1.000 GBP Loss
His Capital was: 1.000GBP His Capital was: 1.000GBP
His Capital now: 1.000+1.000 = 2.000GBP His Capital now: 1.000-1.000 = 0GBP
With 10% move, he earned 100% With 10% move, he lost 100% (all his money)
20% INCREASE IN PRICE 20% DECREASE IN PRICE
New Price: 1.6680 New Price: 1.1120
His position was worth 10.000GBP His position was worth 10.000GBP
10.000 x 20% = 2.000 GBP Profit 10.000 x 20% = 2.000 GBP Loss
His Capital was: 1.000GBP *He can’t lose 2.000GBP since he only has 1.000GBP in his
His Capital now: 1.000+2.000 = 3.000GBP account. When he loses all his money due to a 10%
With 20% move, he earned 200% movement, there will be a margin call. Margin call is the
collateral that the trader has to deposit more money to
his account to be able to continue trading

*As it can be seen from the example above, leverage can be as dangerous as it is advantageous. According
to our experience, 1 to 10 (1:10) leverage should be used as a maximum.

The Complete Guide to Forex Trading www.ibozitrading.com 14

 Chapter 2: Concepts to Know

Stop Loss
So far, we have learned about setting the position sizes and using leverage. Let’s
consider that we have opened a position and things have not exactly gone our way.
How much damage are we going to take? Have we taken calculated risk or are we
gambling? Let’s see below what we should do.
The first thing we need to do is to use a “Stop Loss” order which will act as a safety
seatbelt for us.
Stop loss is designed to limit a trader’s loss on a position. Remember, you will not
take profit from every position you open. It is about how you react in difficult times
that will make you a complete trader. Closing a position with a loss is a virtue. Our
experience shows that average traders have a tendency not to close the positions
with loss because they have an urge to always win. This causes them to absorb more
losses and as a result blow their accounts. Due to the nature of trading, sometimes
you make a loss and move on with other trades.

For example, suppose you just purchased Tesla at 700$ per share. Right after buying
the stock, you entered a stop-loss order for 630$. If the stock falls below 630$, your
shares will be sold at the prevailing market price. How would you know that the stock
price is not going to go down to 200$? By using a stop loss order, you limit your loss
and you have a chance to move on by minimizing your loss…

You will see how to determine the stop loss order rate under the “Technical Analysis”
Title.

The Complete Guide to Forex Trading www.ibozitrading.com 15

 Chapter 2: Concepts to Know

Take Profit
Take profit is a trading command that allows profit to be fixed at a certain amount
and to be executed when the price reaches that level. Remember that no tree can
grow to heaven and prices will not go up forever. Therefore, it is crucial to set a take
profit level without being greedy. It is important to continue opening new positions
once the price hits your take profit level. If you do not place a take profit order and
act greedy, you may lose money when prices drop drastically. Here are the two
scenarios to understand the importance of TP.
Advantage of using TP Order

A scenario where the

position is closed by
hitting TP level & the
trader took the profit

Disadvantage of not using TP Order

A scenario where the

trader is not using TP
order & missed the
chance to take profit.

The Complete Guide to Forex Trading www.ibozitrading.com 16

 Chapter 2: Concepts to Know

Market Execution and the Types of Orders

Market execution is where a trader opens a long or short position by agreeing to
execute a deal at the current price offered by a broker instantaneously. Another
option is using orders whereby a buy or sell order will be place on the market at a
pre-set price and the order will be executed automatically when that certain price
level is reached.
The market execution option is not recommended since it is often based on an instant
decision which can be the result of an impulsive action. A complete trader must be
disciplined and well prepared for all of the scenarios that can occur in the market and
be able to use buy/sell orders accordingly.

Buy Order
Buy order is an instruction to a broker to open a long position automatically from the
ordered price. There are two types of buy orders which are “buy limit” and “buy stop”.
If the buy order is above the current price, a buy stop order is used. On the other
hand, if the buy order is below the current price, a buy limit order is used.

The Complete Guide to Forex Trading www.ibozitrading.com 17

 Chapter 2: Concepts to Know

Sell Order
Sell order is an instruction to a broker to open a short position automatically from the
ordered price. There are two types of sell orders which are “sell limit” and “sell stop”.
If the sell order is above the current price, a sell limit order is used. On the other hand,
if the sell order is below the current price, a sell stop order is used.

The Complete Guide to Forex Trading www.ibozitrading.com 18

 Chapter 2: Concepts to Know

Spreads
There are actually two valid prices in the market: Bid and Ask. A bid price is the price
at which a trader can sell an asset.
The ask price is the price at which a trader can buy an asset. Spread is the difference
between the bid and the ask prices of an asset.
Thanks to the spread concept, brokers earn every time a trade is executed. Trading
at brokers with low spreads is always advantageous for the trader. As such, it is always
recommended to compare spreads used by different brokers when choosing a trading
platform.

BID ASK

The Complete Guide to Forex Trading www.ibozitrading.com 19

 Chapter 3: Technical Analysis Strategies

Introduction to Technical Analysis

As mentioned above, technical analysis is a type of analysis that examines the past
market data in order to make forecasts about future price movements. The
fundamental of technical analysis is based on graph analysis. Technical analysis
should be considered as more practical than fundamental analysis since it studies the
markets and financial instruments as they exist. All the macro data and fundamentals
are included in the price movements and graphs. Although it does not always give
indications which are 100% accurate, it allows a complete trader to create an efficient
trading plan thereby increasing the win probability. There is no uniform technical
analysis strategy which is accepted worldwide. Traders may use different tools for
forecasting such as:

The Complete Guide to Forex Trading www.ibozitrading.com 20

 Chapter 3: Technical Analysis Strategies

Support Lines
Support refers to a price level where a downwards trend can be expected to stop due
to a buying interest since there is a growing demand as the price of an asset falls.
Traders tend to
Open long positions around support lines
Put Stop loss orders below the support lines

Stop Loss orders for long positions are put below the support lines since there is a
foresight that the uptrend will not be valid anymore if price falls below that level

The Complete Guide to Forex Trading www.ibozitrading.com 21

 Chapter 3: Technical Analysis Strategies

Resistance Lines
Resistance refers to a price level where an uptrend can be expected to stop due to a
strong selling interest in order to realize a profit.
Traders tend to
Open short positions around resistance lines.
Put Stop loss orders above the resistance lines.

Stop Loss orders for short positions are put above the resistance lines since there is
a foresight that the downtrend will not be valid anymore if price rises above that
level

The Complete Guide to Forex Trading www.ibozitrading.com 22

 Chapter 3: Technical Analysis Strategies

Moving Average (MA)

Moving average indicates the average price of an asset in a particular period of time.
Unlike support and resistance lines, moving averages are dynamic. MA lines can be
used as support and resistance areas as well.

A typical Moving Average trader mostly put the stop loss order below the MA line
in long positions, and above the MA line in short positions.

Moving averages are customizable indicators, which means that a trader can choose
the time frame when calculating the average. The most common periods used in MA’s
are 20, 50, 100 and 200. Please note that adding a couple of moving averages on a
single chart is also an option. Traders who use multiple moving averages mostly check
the crossover points (intersection) of MAs to make future predictions.

The Complete Guide to Forex Trading www.ibozitrading.com 23

 Chapter 3: Technical Analysis Strategies

Indicators
Indicators are the mathematically calculated tools by using price data to forecast
future price movements. There are hundreds of indicators such as RSI, stochastic or
momentum.

The right way of using indicators is to combine them with the other technical analysis
tools such as support lines, resistance lines or moving averages. According to our
experience, using indicators alone does not give accurate results.

The Complete Guide to Forex Trading www.ibozitrading.com 24

 Chapter 3: Technical Analysis Strategies

Price Action
Price action is the strategy which focuses on the naked price movements on the
charts without looking at any indicators. Price action traders try to generate signals
of entry and exit points by analyzing the power of buyers and sellers on the market.

As it can be seen from the example, yellow boxes indicate that the buyers are losing
power. On the other hand, black down arrows show that sellers are gaining power.
In that kind of scenario, traders may expect a rapid fall on the prices. (Red Down
Arrow)

The Complete Guide to Forex Trading www.ibozitrading.com 25

 Chapter 4: Trading Psychology

Definition of Trading Psychology

Trading psychology refers to the emotions, feelings and mental situations
encountered by a trader during the trading process. A trader can get euphoric over
wins or may feel miserable from big losses. The emotional changes (positive or
negative) are the biggest enemies of a trader since they may lead to extreme greed
or extreme fear.
A complete trader must know how to control their emotions and be as systematic as
possible.

How to control trading psychology?

Do not trade with money you may possibly need to withdraw in the near future
because this will put a pressure on your shoulders.
Consider this as a business. Remember, this is not gambling. Focus on the long-
term profits over small wins instead of trying to win the lottery the very first
time.
Do no rely on your income from trading for your essential spending. This may
force you to “overtrade” and open unnecessary positions.

The Complete Guide to Forex Trading www.ibozitrading.com 26

 Chapter 4: Trading Psychology

How to be systematic in trading?

Before opening a position, answer these questions and obey your own rules:

What is my entry point?

What is my S/L point?
What is my TP point?
What to do if S/L?
What to do if T/P?

Know exactly how much you will lose when you hit a S/L. In this way, the numbers
will not surprise you since you will be ready for it and losses won’t put pressure on
you.

The Complete Guide to Forex Trading www.ibozitrading.com 27

 Final Remarks

Dear Reader,
We would like to extend a warm thank you for having got to the final stage of this
eBook.
This eBook has touched upon widely used concepts in trading, trading strategies and
methods. The contents of this eBook are educational as well as practical and
therefore it is intended to act as a guideline for your real-life trading experience.
However, remember that trading is not only about graph-reading and technical
analysis. It is the combination of knowledge, adopting a winner’s psychology and
having a disciplined strategy.
Our purpose as Ibozi Trading is to prepare you for all the difficulties which you might
encounter on the way and make this experience as enjoyable for you as possible.
Please feel free to access the resources available on our website and benefit from our
service offerings.
We are here to guide you every step of the way.
 Thank you for your time!

Now you can practice what you’ve

learned on any trading platform by
creating your own trading account

Want to learn more about our

educational services and exclusive
benefits?

Feel free to visit

www.ibozitrading.com